An hour before the open and the market is gapping up almost 1/3% on both the SPY and QQQ. In addition, GM is gapping up about the same while the dollar is off an equal amount.
No warning signs this morning for what historically is a good week for the markets. I am long and looking to get longer today if anything triggers. Taking a short trade is out of the question through the end of the year.
We are entering what has been the strongest time for the markets. In addition, the SPY QQQ model that I keep a watch on is looking to trigger long by weeks end. It’s a weekly model that evaluates where SPY is in relation to QQQ. When QQQ leads on a weekly basis that is a variable that is conducive for a tailwind in the markets.
To give you an idea it triggered long the first week in July with an exit toward the end of October. The gain was around 50 SPX points. It is not a 100% trade of course but its just another thing that if triggered contributes to the tailwind. Since 1978 it has only had 7 losing years!
These are the types of variables I like to look at when evaluating the markets. Very similar to variables in sports betting.
Not much happened over the weekend on the home front or geopolitical front. The status quo seems to be where we are at now until the new administration takes over.
So far the Republicans have been pretty good for not starting to fight between themselves. Although I do not expect that to last for long. Priebus as chief of staff and Pence as VP will help a lot in dealing with establishment republicans. Both are respected so they should for awhile be able to keep the Never Trumpers in check.
Human nature what it is I expect the forces that came out against Trump pre-election to start in again next year. So the familiar Trump against everyone will kick in and we have the potential to see the brutal exchanges that were an everyday occurrence a few weeks ago. I doubt Trump meeting with each never Trumper will quell their desire to see him fail. After all, they are politicians:)
The mainstream media has not let up however and neither have the Democrats. In addition, Obama has already indicated he will not take the path Bush took in staying silent during Trump’s term. It may look like people are trying to get along now but I expect the gloves to come off very soon.
This, of course, is not good for the markets. The last thing the markets, both the U.S. and World , want to see is political fighting at the levels we saw pre-election. Depending on how far it goes it could have a very undesirable effect on the markets going forward.
The good news right now, however, is the geopolitical arena is calming down. We have gone from DefCon 3 just a month ago to DefCon 5, the safest level, shortly after Trump won the election. In addition, it appears that Russia and China , for the time being, have backed off they are humiliating our military to give the new administration a chance to settle in and see what approach they will take.
So it appears to me the atmosphere is ripe for a rally into year end that most likely will continue the first quarter of next year.
Lets ee how things play out. It’s always interesting to see how close you get.
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